More economic pain (Conclusion)

Following the takeover of control of the Bab Al Mandab Strait by Iran-backed Houthi rebels, prices of crude oil have now gone up by two to three percent to between $107 and P108 per barrel for Brent crude and $102 to $103 per barrel for West Texas Intermediate as of Sept. 15.

For Filipinos, this translates to a P5.60 per liter addition to the current price of gasoline and P4.30 per liter for diesel. The upward movement of gasoline and diesel would result in another round of adjustments that could also lead to some layoffs of manpower.

This latest development will only exacerbate the unemployment problem that Global Source Partners is warning about.

In a report written by former Bangko Sentral ng Pilipinas official Diwa Guinigundo and Wilhelmina Manalac titled “Unemployment surges as growth loses momentum,” they said there are already indications of this process.

“Although the number of employed persons increased year-on-year to 49.21 million, the average weekly hours worked declined to only 40.6 hours in July 2026 from 42 hours in July 2025. Employment, therefore, should not be judged simply by headcount. The amount of work available to those employed also matters. “

The composition of employment, they add, is equally revealing.

“Services continued to account for the largest share of employment at 62.8 percent, followed by agriculture at 19.7 percent and industry at 17.5 percent. More significantly, manufacturing registered a year-on-year decline of 134,000 employed persons in July.”

They explained that “July Purchasing Managers’ Index does not point to an outright industrial contraction. On the contrary, manufacturing PMI improved to 51.8 in July from 50.9 in June, marking a third consecutive month of expansion. New orders and output also improved. Yet this should not be interpreted as an all-clear signal. Firms continued to face supply-chain disruptions, rising input costs and weak business confidence, while manufacturing employment declined.”

They believe that the more appropriate reading is that “the economy is showing pockets of resilience amid a broader loss of momentum.”

Headline inflation eased slightly to 6.2 percent in July from 6.4 percent in June, but this remains well above the previous year’s 0.9 percent. Core inflation stood at 4.2 percent, suggesting that underlying price pressures have not disappeared. Food inflation remained at 5.3 percent, while transport inflation, although easing, was still elevated at 11.9 percent.

They warn though that it creates a particularly difficult policy environment. “The economy is slowing, but inflation is still too high to be dismissed. Weakening employment and output would ordinarily argue for policy support, while persistent price pressures argue for caution. “

The July labor numbers, they add, also reveal an important structural issue. “Of the 3.14 million unemployed Filipinos, a substantial proportion are young people. Meanwhile, 6.33 million employed Filipinos remained underemployed, meaning they wanted additional hours, another job, or a job with longer working hours. The underemployment rate was 12.9 percent, better than the 14.8 percent a year earlier, but still significant. “

The challenge, the report argues, “is not simply to create jobs, but to create productive, adequately paid and sufficiently stable jobs. This distinction is critical. An economy can report rising employment while simultaneously experiencing weaker labor utilization, shorter working hours and greater dependence on low-productivity activities. The quality of employment matters as much as the quantity.”

Regional distribution, they said, also deserves attention. “The National Capital Region registered an unemployment rate of 8.2 percent, followed by the Bicol Region at eight percent. Six regions were above the national average. This suggests that the labor-market weakness is not evenly distributed and that the problem of employment absorption has a significant geographic dimension. “

The government, they noted, has appropriately emphasized investments, skills development, innovation and business competitiveness. “These are necessary. But they should be complemented by a stronger focus on the immediate demand conditions facing businesses. The issue is not simply whether workers possess the right skills. It is also whether businesses have sufficient demand, confidence and investment incentives to hire them. This is particularly important because the second-quarter GDP data showed a 9.2-percent contraction in gross capital formation.”

Investment, they stress, is the bridge between today’s economic activity and tomorrow’s productive employment. “If investment remains weak, the economy’s capacity to absorb a rapidly growing labor force will also remain constrained. The July labor report should, therefore, be viewed neither as an isolated deterioration nor simply as the inevitable consequence of fresh graduates entering the workforce. It is a warning.”

They acknowledge that the “Philippine economy is growing, but at a pace that may no longer be sufficient to comfortably absorb a rising labor force. GDP growth has slowed sharply, investment has contracted, employment quality remains an issue, and inflation remains elevated. However, at the same time, some leading indicators such as manufacturing PMI show that parts of the economy are beginning to recover. The emerging picture is consequently not one of outright recession. It is more subtle, and perhaps more challenging: an economy losing momentum while inflation remains uncomfortably high, with the labor market beginning to feel the strain.”

Thus, in the months ahead, Gunigundo and Manalac point out, “ If the rise in unemployment persists into August and September, it would strengthen the case that the second-quarter slowdown was not merely a temporary statistical episode, but the beginning of a broader weakening in economic activity. Conversely, a rebound in employment, hours worked, investment and consumption would suggest that the July deterioration was temporary.”

“The message from the labor market is clear: economic growth must become faster, broader and more employment-intensive. The ultimate test of economic performance is not simply how fast GDP grows on paper. It is whether that growth creates enough productive opportunities for Filipinos who are willing and able to work.”